Student loan official who resigned: CFPB has been a ‘complete failure’ over the last year

The former student loan ombudsman for the Consumer Financial Protection Bureau (CFPB) believes that agency has been a “complete failure” over the last year and has “completely walked away from its mission” regarding student loan borrowers.

Seth Frotman, who resigned in protest in August 2018, expressing outrage at the then-leadership’s treatment of the nearly $1.5 trillion student loan industry, asserted that things have gotten even worse since his departure.

“I honestly don't say this lightly, but I don't know how you could look at the things that have happened over the last year … [and] under the new leadership of the bureau and not say that it is a complete failure in doing its job on behalf of student loan borrowers,” Frotman said. “The current political leadership at the CFPB has prioritized the interests of the student loan industry over the very real plight of the 44 million Americans who have student loan debt.”

The CFPB declined to comment for this story.

A graduate cries during the final commencement ceremony at Sweet Briar College on May 16, 2015. The school is closing this summer due to funding shortfall. (Photo: Jabin Botsford/The Washington Post via Getty Images)

‘There's congressionally mandated reports that they have failed to do’

“The agency was created to stand up for consumers and to stop companies from ripping off borrowers,” added Frotman, who is now the current Executive Director of D.C.-based nonprofit Student Borrower Protection Center. “Instead, leadership has shielded student loan companies from accountability.”

In May 2018, the interim head of the CFPB downgraded the student loan division to the bureau’s consumer information unit.

In May 2019, the CFPB noted difficulties in obtaining information about student lenders and loan servicers from the DOE.

In August 2019, the CFPB replaced Frotman with someone who had been a former executive responsible for compliance at a student loan servicer.

Outstanding student loans currently stand at $1.48 trillion as of the second quarter this year, according to the New York Fed. About 35% of the loans in the severely derogatory balance were student loans.

“What is happening at the CFPB now, when it comes to the student loan market, is just an utter neglect of the duty that they are supposed to perform,” said Frotman. “There's congressionally mandated reports that they have failed to do, that the new director herself admitted that the Bureau is essentially being blocked from overseeing nearly a trillion dollars of student loans and they refuse to take action on their account to stand up for borrowers. … These consumers deserve a watchdog to be working on their behalf.”

Kathleen Laura Kraninger testifies before a Senate Banking Committee hearing on her nomination to be director of the Consumer Financial Protection Bureau on Capitol Hill in Washington, U.S., July 19, 2018. (Photo: REUTERS/Alex Wroblewski)

‘Conflict of interest demonstrates who the Trump Administration really works for’

Frotman testified to Congress earlier this year and maintained the same grievances about the agency run by CFPB Director Kathy Kraninger.

“Student loan debt has reached crisis levels, yet the Trump Administration has turned its back on effective oversight of student loan companies out to make a buck off the backs of students,” Sen. Warren told Yahoo Finance. “It took over a year for the CFPB to hire a new student loan watchdog, and then CFPB appointed a former executive of a student loan giant accused of cheating students to do the job.”

The presidential candidate, who has proposed a large scale debt forgiveness plan, added: “This kind of conflict of interest demonstrates who the Trump Administration really works for — student loan companies, not students.”